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Cadence expects reserve increase of 55%-65% on CECL

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Cadence expects reserve increase of 55%-65% on CECL

Houston-based Cadence Bancorp. is expecting reserves to increase 55%-65% upon the adoption of the current expected credit loss model, bank management said on its third-quarter earnings call.

The expected impact to capital — less than 10 basis points of total capital — is "minimal," said CFO Valerie Toalson.

The bank's reserve levels for its originated portfolio are expected to increase 35% to 45%, mainly in the consumer portfolio, management said.

In addition, the bank's acquisition of Atlanta-based State Bank Financial Corp. will require the bank to establish a reserve, despite their recent deal mark, effectively creating a double count. This additional reserve alongside the increase on the originated loan portfolio will bring the total reserve increase to between 55% and 65%.